form10-q.htm

U.S. Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

[X]	Quarterly Report Under Section 13 or 15(d) of The Securities Exchange Act of 1934 for the Quarterly Period Ended September 30, 2009

[ ]	Transition Report Under Section 13 or 15(d) of The Securities Exchange Act of 1934 for the Transition Period from _______ to _______

Commission file number 333-142429

INFORMATION SYSTEMS ASSOCIATES, INC.

(Exact name of small business issuer as specified in its charter)

FLORIDA	65-0493217
(State or other jurisdiction of	(IRS Employer Identification No.)
incorporation or organization)

1151 W 30th Street, Ste E Palm City, FL 34990

(Address of principal executive offices)

(772) 403-2992

(Issuer's telephone number)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ]

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the exchange act). Yes [ ] No [X]

Number of shares of common stock outstanding as of September 30, 2009: 17,966,084

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨
Non-accelerated filer	¨ (Do not check if a smaller reporting company)
Accelerated filer	¨
Smaller reporting company	þ

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION

The discussion contained in this 10-Q under the Securities Exchange Act of 1934, as amended, contains forward-looking statements that involve risks and uncertainties. The issuer's actual results could differ significantly from those discussed herein. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as "anticipate," "expect," "intend," "plan," "will," "we believe," "the Company believes," "management believes" and similar language, including those set forth in the discussions under "Notes to Financial Statements" and "Management's Discussion and Analysis or Plan of Operation" as well as those discussed elsewhere in this Form 10-Q. We base our forward-looking statements on information currently available to us, and we assume no obligation to update them. Statements contained in this Form 10-Q that are not historical facts are forward-looking statements that are subject to the "safe harbor" created by the Private Securities Litigation Reform Act of 1995.

Table of Contents

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION



ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)	1

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	9

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	13

ITEM 4. CONTROLS AND PROCEDURES ITEM 4T. CONTROLS AND PROCEDURES	13 13

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS	14

ITEM 1A. RISK FACTORS	14

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	14

ITEM 3. DEFAULTS UPON SENIOR SECURITIES	14

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	14

ITEM 5. OTHER INFORMATION	14

ITEM 6. EXHIBITS	14

SIGNATURES	15

INFORMATION SYSTEMS ASSOCIATES, INC.
BALANCE SHEETS
ASSETS

	September 30,			December 31,
	2009			2008
	(Unaudited)			(Audited)
Current Assets
Cash and cash equivalents	$	54,240		$	204,768
Accounts receivable		141,756			94,121
Prepaid consulting		263,750			518,438
Prepaid expenses		9,921			-

Total Current Assets		469,667			817,327

Property and Equipment (net)		154,978			21,168

Other Assets
Investments, at cost		73,958			-

TOTAL ASSETS	$	698,603		$	838,495

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
Accounts payable	$	19,793		$	10,326
Accrued expenses		12,290			21,399
Notes payable		5,242			-
Other liabilities		700			600
Deferred revenue		-			1,500

Total Current Liabilities		38,025			33,825

Stockholders' Equity
Common stock-$.001 par value, 50,000,000 shares
authorized, 17,966,084 and 16,309,834
issued and outstanding for 2009 and 2008
respectively		17,966			16,310
Additional paid in capital		2,098,513			1,587,669
Retained (deficit)		(1,455,901	)		(799,309	)

Total Stockholders' Equity		660,578			804,670

TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY	$	698,603		$	838,495


The accompanying notes are an integral part of these unaudited financial statements.

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INFORMATION SYSTEM ASSOCIATES, INC.
STATEMENTS OF OPERATION
(UNAUDITED)


	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2009			2008			2009			2008

Revenue	$	271,533		$	333,210		$	606,865		$	1,062,499

Cost of Sales		625			7,413			35,670			33,938

Gross Profit		270,908			325,797			571,195			1,028,561

Operating Expenses
Administrative and general		88,615			231,937			206,942			470,910
Payroll and payroll taxes		52,790			44,544			156,269			122,363
Professional		275,201			367,817			865,403			727,087
Total Operating Expenses		416,606			644,298			1,228,614			1,320,360

(Loss) Before Other Income
and (Expense)		(145,698	)		(318,501	)		(657,419	)		(291,799	)

Other Income (Expense)
Interest income		2			-			827			-
Consulting fees		-			(4,942	)		-			(9,239	)
Total other income (expense)		2			(4,942	)		827			(9,239	)

(Loss) Income Before
Income Taxes		(145,696	)		(323,443	)		(656,592	)		(301,038	)

Provision for Income Taxes		-			(4,415	)		-			-

Net (Loss)		(145,696	)		(319,028	)		(656,592	)		(301,038	)

Other Comprehensive Income (Loss)
Unrealized gain (loss) on securities:
Arising during the year		(12,600	)		-			1,242			-
Reclassification to net income		-			-			-			-

Total other comprehensive income		(12,600	)		-			1,242			-

Comprehensive Income (Loss)	$	(158,296	)	$	(319,028	)	$	(655,350	)	$	(301,038	)

Basic and Fully Diluted Earnings (Loss) per Share:
Basic and diluted		(0.01	)		(0.03	)		(0.04	)		(0.03	)
Weighted average common shares
outstanding		16,811,222			12,570,501			17,594,001			11,792,724


The accompanying notes are an integral part of these unaudited financial statements.

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INFORMATION SYSTEMS ASSOCIATES, INC. STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)

	2009			2008
Cash Flows from Operating Activities
Net (Loss)	$	(656,592	)	$	(301,038	)
Adjustments to reconcile net (loss) to net
cash provided from operating activities:
Depreciation and amortization		3,728			36,584
Common stock for services		517,188			250,500

(Increase) decrease in:
Accounts receivable		(47,635	)		(137,100	)
Prepaid consulting		-			1,798
Prepaid expenses		(9,921	)		-
Deposits		-			1,500
Increase (decrease) in:
Accounts payable		9,467			13,863
Accrued expenses		(9,109	)		1,825
Other liabilities		100			600
Deferred revenue		(1,500	)		-

Net Cash (Used in) Operating
Activities		(194,274	)		(131,468	)

Cash Flows from Investing Activities
Computer software development costs		(128,389	)		(18,041	)
Software license agreement - payments received		-			106,010
Purchase of property and equipment		(9,149	)		(9,498	)
Purchase of investment		(73,958	)		-

Net Cash (Used In) Provided by
Investing Activities		(211,496	)		78,471

Cash Flows from Financing Activities
Proceeds from issuance of stock		250,000			100,000
Borrowings from note payable		9,615			-
Payments made on note payable		(4,373	)		-
Payments made on line of credit		-			(9,030	)

Net Cash Provided by
Financing Activities		255,242			90,970

Net Change in Cash and Cash
Equivalents		(150,528	)		37,973

Cash and Cash Equivalents at
Beginning of period		204,768			13,326

End of Period	$	54,240		$	51,299

The accompanying notes are an integral part of these unaudited financial statements.

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INFORMATION SYSTEMS ASSOCIATES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009
(UNAUDITED)


									Additional
	Common Stock				Preferred Stock				Paid in		Retained
	Shares		Amount		Shares		Amount		Capital		(Deficit)

Balance, January 1,		16,309,834	$	16,310		-	$	-	$	1,587,669	$	(799,309	)

Proceeds from issuance of stock - for cash		1,000,000		1,000		-		-		249,000		-

Proceeds from issuance of stock - for services		656,250		656						261,844		-

Net (loss)		-		-		-		-		-		(656,592	)

Balance, September 30,		17,966,084	$	17,966		-	$	-	$	2,098,513	$	(1,455,901	)



The accompanying notes are an integral part of these unaudited financial statements.

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INFORMATION SYSTEMS ASSOCIATES, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

SEPTEMBER 30, 2009 AND 2008

NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

Business Activity

Information Systems Associates, Inc. (Company) was incorporated under the laws of the state of Florida on May 31, 1994. The Company provides services and software system design for the planning and implementation of Computer Aided Facilities Management (CAFM) based asset management tools.

Results of operations for interim periods presented are not necessarily indicative of results of operations that might be expected for future interim periods or for the full fiscal year ended December 31, 2008.

Recent Accounting Literature

FASB Accounting Standards Codification

(Accounting Standards Update (“ASU”) 2009-01)

In June 2009, FASB approved the FASB Accounting Standards Codification (“the Codification”) as the single source of authoritative nongovernmental GAAP. All existing accounting standard documents, such as FASB, American Institute of Certified Public Accountants, Emerging Issues Task Force and other related literature, excluding guidance from the Securities and Exchange Commission (“SEC”), have been superseded by the Codification. All other non-grandfathered, non-SEC accounting literature not included in the Codification has become nonauthoritative. The Codification did not change GAAP, but instead introduced a new structure that combines all authoritative standards into a comprehensive, topically organized online database. The Codification is effective for interim or annual periods ending after September 15, 2009, and impacts the Company’s financial statements as all future references to authoritative accounting literature will be referenced in accordance with the Codification. There have been no changes to the content of the Company’s financial statements or disclosures as a result of implementing the Codification during the quarter ended September 30, 2009.

As a result of the Company’s implementation of the Codification during the quarter ended September 30, 2009, previous references to new accounting standards and literature are no longer applicable. In the current quarter financial statements, the Company will provide reference to both new and old guidance to assist in understanding the impacts of recently adopted accounting literature, particularly for guidance adopted since the beginning of the current fiscal year but prior to the Codification.

Subsequent Events

(Included in Accounting Standards Codification (“ASC”) 855 “Subsequent Events”, previously SFAS No. 165 “Subsequent Events”)

SFAS No. 165 established general standards of accounting for and disclosure of events that occur after the balance sheet date, but before the financial statements are issued or available to be issued (“subsequent events”). An entity is required to disclose the date through which subsequent events have been evaluated and the basis for that date. For public entities, this is the date the financial statements are issued. SFAS No. 165 does not apply to subsequent events or transactions that are within the scope of other GAAP and did not result in significant changes in the subsequent events reported by the Company. SFAS No. 165 became effective for interim or annual periods ending after June 15, 2009 and did not impact the Company’s financial statements. The Company evaluated for subsequent events through the issuance date of the Company’s financial statements. No recognized or non-recognized subsequent events were noted.

Determination of the Useful Life of Intangible Assets

(Included in ASC 350 “Intangibles — Goodwill and Other”, previously FSP SFAS No. 142-3 “Determination of the Useful Lives of Intangible Assets”)

FSP SFAS No. 142-3 amended the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under previously issued goodwill and intangible assets topics. This change was intended to improve the consistency between the useful life of a recognized intangible asset and the period of expected cash flows used to measure the fair value of the asset under topics related to business combinations and other GAAP. The requirement for determining useful lives must be applied prospectively to intangible assets acquired after the effective date and the disclosure requirements must be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date. FSP SFAS No. 142-3 became effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The adoption of FSP SFAS No. 142-3 did not impact the Company’s financial statements.

Noncontrolling Interests

(Included in ASC 810 “Consolidation”, previously SFAS No. 160 “Noncontrolling Interests in Consolidated Financial Statements an amendment of ARB No. 51”)

SFAS No. 160 changed the accounting and reporting for minority interests such that they will be recharacterized as noncontrolling interests and classified as a component of equity. SFAS No. 160 became effective for fiscal years beginning after December 15, 2008 with early application prohibited. The Company implemented SFAS No. 160 at the start of fiscal 2009 and no longer records an intangible asset when the purchase price of a noncontrolling interest exceeds the book value at the time of buyout. Any excess or shortfall for buyouts of noncontrolling interests in mature restaurants is recognized as an adjustment to additional paid-in capital in stockholders’ equity. Any shortfall resulting from the early buyout of noncontrolling interests will continue to be recognized as a benefit in partner investment expense up to the initial amount recognized at the time of buy-in. Additionally, operating losses can be allocated to noncontrolling interests even when such allocation results in a deficit balance (i.e. book value can go negative).

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INFORMATION SYSTEMS ASSOCIATES, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

SEPTEMBER 30, 2009 AND 2008

NOTE 1 – STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Noncontrolling Interests (continued)

The Company presents noncontrolling interests (previously shown as minority interest) as a component of equity on its consolidated balance sheets. Minority interest expense is no longer separately reported as a reduction to net income on the consolidated income statement, but is instead shown below net income under the heading “net income attributable to noncontrolling interests.” The adoption of SFAS No. 160 did not have any other material impact on the Company’s financial statements.

Consolidation of Variable Interest Entities — Amended

(To be included in ASC 810 “Consolidation”, SFAS No. 167 “Amendments to FASB Interpretation No. 46(R)”)

SFAS No. 167 amends FASB Interpretation No. 46(R) “Consolidation of Variable Interest Entities regarding certain guidance for determining whether an entity is a variable interest entity and modifies the methods allowed for determining the primary beneficiary of a variable interest entity. The amendments include: (1) the elimination of the exemption for qualifying special purpose entities, (2) a new approach for determining who should consolidate a variable-interest entity, and (3) changes to when it is necessary to reassess who should consolidate a variable-interest entity. SFAS No. 167 is effective for the first annual reporting period beginning after November 15, 2009, with earlier adoption prohibited. The Company will adopt SFAS No. 167 in fiscal 2010 and does not anticipate any material impact on the Company’s financial statements.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Comprehensive Income

Comprehensive income is the total of (1) net income (loss) plus (2) all other changes in the net assets arising from non-owner sources, which are referred to as comprehensive income. The Company has presented a statement of income which includes other comprehensive income.

NOTE 2 – CASH AND CASH EQUIVALENT

At times throughout the year the Company may maintain certain bank accounts in excess of the FDIC insured limits. At September 30, 2009 and December 31, 2008, the amounts on deposit at institutions were:

September 30, 2009 December 31, 2008

Wachovia Bank (FDIC insured to $250, 000

and $100,000 for 2009 and 2008, respectively) $ 54,240

$204,768

NOTE 3- PROPERTY AND EQUIPMENT
	September 30, 2009		December 31, 2008

Computer software (developed)	$	161,003	$	32,614
Computer software (purchased)		590		590
Web site development		5,016		-
Furniture, fixtures, and equipment		27,225		23,093
		193,834		56,297
Less: accumulated depreciation and amortization		(38,856)		(35,129)

	$	154,978	$	21,168

Depreciation and amortization expense for the nine months ended September 30, 2009 and 2008 was $3,728 and $36,584, respectively.

NOTE 4 – COMPUTER SOFTWARE DEVELOPED

In 2009, the Company began development of an updated version of the “On Site Physical Inventory” (OSPI) product. During the year ended December 31, 2007, the Company completed the development of the initial version of, “On Site Physical Inventory” (OSPI). The OSPI software was developed to be used by the Company for collecting data for information technology assets installed in data centers.

After implementing the use of the OSPI software, the Company decided to market the software and entered into a software license agreement with Aperture Technologies, Inc.

The Company has capitalized the cost of the OSPI software using FASB Accounting Standards Codifications 350-40 “Internal Use Software” (formerly Statement of Position (SOP) 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use”) as follows:

	September 30, 2009		December 31, 2008

Development costs	$	266,789	$	138,400
Software license agreement- payments received		(135,257)		(135,257)
Software license agreement- marketing costs		29,471		29,471
		161,003		32,614
Less: accumulated depreciation and amortization		(29,471)		(29,471)
	$	131,532	$	3,143

NOTE 5 – INVESTMENT

On April 17, 2009, the Company entered into a strategic alliance agreement with Rubicon Software Group, lpc (a company registered under the laws of England and Wales). The Company will be Rubicon’s exclusive agent in the United States for reselling Rubicon’s software and services. In return, Rubicon will be a software development partner and provide consulting services to the Company.

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INFORMATION SYSTEMS ASSOCIATES, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

SEPTEMBER 30, 2009 AND 2008

NOTE 5 – INVESTMENT (continued)

The Company has agreed to purchase 2,500,000 ordinary shares for a subscription price of $.02 (two pence) a share. The total cost of the subscription was $50,000 or $73,958, USD. Within ninety days of the subscription date, the Company could purchase an additional 2,500,000 shares at the same subscription price in British pounds. The ninety day period has lapsed with the Company not purchasing any additional shares.

Also, the Company has the ability, over the next three years, of subscribing to a maximum 5,000,000 warrant shares. Each warranted share will be at a subscription price of £.05 (five pence) per share and will be issued in offerings of 100,000 shares. The number of subscripted shares will be based on gross revenue received by Rubicon Software Group, lpc.

Securities investments not classified as either held-to-maturity or trading securities are classified as available-for-sale securities. Available-for-sale securities are recorded at fair value in investments and other assets on the balance sheet, with the change in fair value during the period excluded from earnings and recorded net of taxes as a component of other comprehensive income.

Available –for-sale securities were as follows:

	September, 30 2009						December 31, 2008
	Cost		Market		Unrealized Gain (loss)		Cost		Market		Unrealized Gain (loss)
Type of securities:
Common stock	$	73,968	$	75,210	$	1,242	$	-	$	-	$	-
Total	$	73,968	$	75,210	$	1,242	$	-	$	-	$	-

NOTE 6 – FAIR VALUE MEASUREMENTS

In 2009, the Company implemented FASB Accounting Standards Codification 850 “Fair Value Measurements and Disclosures” (formerly SFAS 157, “Fair Value Measurements”), relative to its financial assets and liabilities that are recognized or disclosed at fair value in the financial statements at least annually.

In determining the fair value of investments held by the Company, the Level 1 valuation technique of “Quoted Market Price in Active Market” was implemented as the Company was able to obtain a quote from the London Stock Exchange as of September 30, 2009.

As of September 30, 2009 the Company’s investments that are carried at fair value on a recurring basis include the following:

Fair Value Measurements Using

Total

Quoted Prices in Active Markets

(Level 1)

Significant Other Observable Inputs

(Level 2)

Significant Unobservable Inputs

(Level 3)